Posted by Max Dunn Mon, 09 Mar 2009 22:25:54 GMT | 6 comments
Sometimes people talk about "running out of oil", but the world will never completely run out of oil. There will always be some oil remaining somewhere that can be scavenged from old fields, reclaimed from tar sands or stripped from oil shale.
There is, however, a limit to how fast we can pull oil out of the ground. Peak Oil will occur when the world hits this peak in production – and this will likely happen soon!
Posted by Max Dunn Sun, 08 Mar 2009 05:22:16 GMT | no comments
Previously, I posted a table showing how oil in the US is used. Here is a graph that shows the same information in a prettier form:
(Reference: Year 2000 data from Ending the Oil Age)
Posted by Max Dunn Wed, 28 Jan 2009 01:44:29 GMT | 1 comment
The price we pay for a gallon of gas at the pump doesn’t include all the costs associated with it, like environmental costs and tax subsidies. One older study found that if we included all of these, we would be paying and extra $5 to $14 per gallon!
However, if we look at just the cost spent on military defense of oil in the Persian Gulf, it would be less than this.
One rough estimate would be to assume that 15% of the $430 billion DoD budget was spent on defending our oil interests in the Persian Gulf. Spread over the 142 billion gallons of gas we use each year, it works out to $0.46 per gallon.
Of course the hard number to determine is how much of the military budget goes to just protecting oil in the Persian Gulf. The $65 billion seems to fall in the middle range of what is spent on that region, but there is a lot of differences in opinion over how much spending would be reduced if we didn’t need to protect the oil there.
Here are some of the studies and what they determined we would need to add to the price of a gallon of gas to cover the cost of protecting oil in the Persian Gulf:
So don’t assume the price you pay at the pump is the true cost of gasoline. There are a lot more costs hidden away in making that gasoline available and in the environmental problems it causes that you pay for elsewhere.
Posted by Max Dunn Mon, 26 Jan 2009 00:25:41 GMT | no comments
Here is an interesting article written by Michael W. Foley, a former professor in the social sciences, that looks at various examples around the world where there was social breakdown, what the factors led to ensuing violence, and how the US might react given a similar crisis situation:
He found that while there were many cases where economic and ecological collapse led to violence, there were also many cases where it didn’t. The major determining factors were:
His conclusion is that prospects for violence in the US following a “hard landing” are very small, except in some isolated locations where police and community support break down.
Posted by Max Dunn Tue, 02 Dec 2008 16:56:34 GMT | no comments
It is well known that a large part of our military expenses goes to protecting the flow of oil from the Persian Gulf. What has not been as clear is the actual cost of this protection. However a recent study sheds some light on this hidden expense.
In this study, Mark Delucchi of the Institute of Transportation Studies at UC Davis estimates that American taxpayers spent between $27 billion and $73 billion in 2004 (which was the most recent year data was available) for military protection of US oil interests in the Persian Gulf region.
While this is a huge number by itself, it works out to only $0.03 to $0.15 cents per gallon of gas for motor vehicle use.
Posted by Max Dunn Fri, 21 Nov 2008 01:32:02 GMT | no comments
Previously we discussed oil price fluctuations in terms of non-elastic supply and non-elastic demand. Here is a short video that graphically illustrates this same principle:
Posted by Max Dunn Mon, 03 Nov 2008 22:46:56 GMT | no comments
Oil went up to $147 per barrel and is now down to $64. Does this mean that the oil shortage is over and that we can go back to driving SUVs? No, not unless you can afford to drive your gas hog when the price of gas goes back up over $4 per gallon. Actually, this type of wide oil price fluctuation is to be expected.
The reason for these fluctuations is the inelasticity of both the supply and demand for oil. On the supply side, nowhere in the world is it possible to just turn up a tap and pump more oil – everyone is pumping as much as they can. (Saudi Arabia and Iran do have extra capacity for heavy, sour crude, but that doesn’t help.) So in order to increase the supply of oil, it is necessary to drill more wells or employ advanced extraction techniques, all of which take time.
On the supply side, demand is very inelastic as well. When the price of gas goes up, you don’t immediately ditch your SUV and buy a Prius or find a job closer to home. In the short term, you still need to drive to work, take the kids to school and heat your house, so you pay whatever it costs.
So now we have an inelastic supply meeting an inelastic demand and what do you get? That’s right, wildly fluctuating prices! As soon as demand creeps just a little bit above supply, the price shoots up. Then when the supply goes up just a little, and demand goes down just a little, prices fall.
This is a classic pattern and one that we have seen before with whale oil. Whale oil mimics closely what we are seeing with fossil oil in that techniques to extract it got better and better and overran the natural supply. As the supply started to peak, prices went through some wild fluctuations too:
So don’t be fooled by the current low oil prices. They are not a sign that all is well, but only a sign that the worst is yet to come.
(For more information, see Peak Oil and EVs)
Posted by Max Dunn Thu, 16 Oct 2008 17:10:44 GMT | no comments
The Global Climate and Energy Project (GCEP) held its fourth annual energy research symposium at the beginning of October.
GCEP is an interesting group based at Stanford University that seeks new solutions to one of the grand challenges of this century: supplying energy to meet the changing needs of a growing world population in a way that protects the environment. With funding of $225 million from Exxon, GE, Schlumberger and Toyota, GCEP supports a lot of diverse high-risk and high-reward projects in areas such as solar energy, batteries, cellulosic ethanol, hydrogen, CO2 capture and storage, advanced combustion and more
This was a fantastic symposium where researchers from Stanford and around the world discussed GCEP’s projects. Some of the highlights for me were:
For more information, see my notes of the symposium presentations..
Posted by Max Dunn Mon, 13 Oct 2008 23:58:22 GMT | no comments
If anyone still believes that offshore drilling will significantly increase our oil supplies, take a look at the map below. The areas in blue are those that are already being drilled and also those with the most oil. The areas in white are the ones they might open for drilling, but these areas aren’t expected to yield much oil anyways:
If that isn’t enough, consider that the U.S. Energy Information Administration (EIA) recently did a detailed study of the likely outcome of offshore drilling. Their conclusion:
The projections in the OCS access case indicate that access to the Pacific, Atlantic, and eastern Gulf regions would not have a significant impact on domestic crude oil and natural gas production or prices before 2030.
(References: The Oil Drum – Offshore Drilling Debate, Climate Progress – EIA Bombshell)
Posted by Max Dunn Sat, 12 Jul 2008 03:59:56 GMT | no comments
It is commonly thought that a large part of the increase in the price of oil is due to the devaluation of the dollar. For instance, since the the euro is now 60% higher than the dollar it seems to make sense that 60% of increase in the price of oil is due to this devaluation of the dollar. However when you look more closely at the economics behind oil pricing, you will find that this is not the case at all. Actually, it doesn’t make any difference what currency oil is priced in because the price would still be the same.